Tax reform proposed by the Executive at risk

Despite the fact that the Commissions of Economy and Constitution of Congress had scheduled yesterday to discuss the prediction that grants powers to the Executive power to legislate on tax, fiscal, financial and economic matters, it did not succeed.

The reason? The Economy Commission decided to adjourn the session to seek a consensus with the Constitution and officials of the Ministry of Economy and Finance (MEF).

In dialogue with La República, the president of the Economic Commission, Silvia MontezaHe pointed out that the main difference between the two groups lies in the mining tax regime.

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And it is that, while the one of Economy considers yes to give them faculties in this matter to the Executive, the one of Constitution is opposed. Given this, this Monday they will meet to reach a consensus.

According to Monteza, the Constitution Commission has informed them that this point has not been well supported, since the rates that would be raised in the mining tax regime have not been specified.

Besides, the Constitution Commission has asked for the preliminary report of the International Monetary Fund (IMF) to be published, which concludes that there is room to increase the progressiveness of the mining tax regime without affecting the competitiveness of the sector.

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“Constitution does not believe in that report. They want it to be viewed, but the MEF has informed us that it cannot view it until the report is officially released ”, explained Monteza.

For her part, Congresswoman Isabel Cortéz said that the session of the Economy Commission was adjourned at the request of Patricia Juárez, who chairs the Constitution, as she argued that businessmen should be consulted first.

“I have seen congressmen, especially Fujimori, blocking the session,” Cortéz said.

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Impact

According to the predictions that both commissions already had ready, it was only proposed to give partial powers to the Executive, which would prevent the entire proposed tax reform from being implemented.

It is important Remember that the reform aims to generate an additional collection of S / 12,000 million per year.

Alex Contreras, Deputy Minister of Economy, pointed out that not giving powers on some issues would imply that these estimated revenues will be reduced.

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The official explained that, if the Economic Commission’s prediction is approved, only S / 5,350 million per year could be collected; that is, 55% less than what was planned with the tax reform. Meanwhile, if the text of the Constitution Commission were approved, the annual income that would be obtained under this package of measures would be S / 1,264 million, this is 90% less than the estimated.

Furthermore, these fewer resources translate into fewer bankable projects (see infographic).

“That has a huge cost in gaps that would persist in education, health, connectivity. That is why we hope to be able to reach a consensus that allows the most important measures to be approved, because precisely the group of measures that we have sent -the measures that have a higher expected collection- are the ones that are not allowing us to legislate ”, pointed out Contreras.

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Main negatives

Both the Economic Commission like the Constitution Commission They agree that it is not feasible to empower the Executive to make adjustments to the first and second category Income Tax, and to work income.

Despite the fact that they will still have a meeting with the MEF on Monday, the president of the Commission, Silvia Monteza, announced that it is very unlikely that they will change their opinion, since they consider that raising rates could end up being a mechanism to evade taxes and increase informality.

“I don’t think it will be reversed because the Constitution Commission has the same opinion, so we have the same ideas,” Monteza noted.

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For his part, the Vice Minister of Economy stressed that these proposals aim at making the system more fair, equitable and progressive. In addition, he clarified that these measures do not represent a significant burden, on the contrary, a large group would be exempted from taxes.

Likewise, the official pointed out that -if necessary- the MEF It is willing to be more specific in the scope of its proposals so that they can be granted the powers in tax matters.

Formalization of mypes excluded

Another proposal that the Constitution Commission has excluded is the one that seeks to improve and simplify tax policy for the mype sector.

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If not considered, this would go against the formalization of small companies, according to the MEF.

What is proposed is to rationalize the tax treatment of the mype, modifying the Single Simplified Regime (RUS) and eliminating the Special Income Regime (RER) and the Mype Tax Regime (RMT).

This also promotes labor formalization in the small business sector.

Reactions

Silvia Monteza, president of the Economic Commission of Congress

“The problem itself was the mining faculties, We had considered it favorable and the Constitution Commission did not agree because it was not well supported and did not know what percentage the mining companies were going to raise ”.

Alex Contreras, Vice Minister of Economy

“If the prediction comes out as proposed by the Economic Commission, it is a reduction of 55% of the estimated in resources and, if it comes out as the prediction of the Constitution Commission, it is a reduction of 90%.”

The data

Against time. Changes in the mining tax regime and those of Income Tax must take place before the end of the year. Otherwise, it would not be in force in 2022, but would only come into effect in 2023.

Extension. Parliamentary sources indicated that the legislature could be extended until January 15 of next year.